Umno Incorporated (part 2)

In January 1993, Realmild (M) Sdn Bhd, a private company controlled by the management of NSTP and TV3, acquired 48 per cent of NSTP and 43 per cent of TV3 in a deal worth a whopping RM800 million -- it might still be the largest management buyout in Malaysia to date. Realmild was then controlled by four individuals closely linked to Deputy Premier then Anwar Ibrahim -- namely Abdul Kadir Jasin, Mohd Noor Mutalib, Ahmad Nazri Abdullah and Khalid Ahmad. The four were executives in the NSTP group, two of them -- Kadir and Nazri -- headed the English and Bahasa Malaysia sections respectively of the newspaper group.

THE CORRIDORS OF POWER

Raja Petra Kamarudin

In 1992, Anwar Ibrahim, Malaysia’s Finance Minister, approved the management buy-out (MBO) of New Straits Times Press Holdings Bhd (NSTP), the largest media group in the country, and also public-listed TV3. Anwar directed Munir Majid of the Securities Commission to approve the injection of Realmild into MRCB, which led to Realmild Sdn Bhd controlling four listed companies -- MRCB, Malakoff, TV3 and New Straits Times Press Bhd.

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MRCB’s chequered past colours its future

(KinBiz, 21 February 2013) -- MRCB started out as Perak Carbide Sdn Bhd in 1969. In the early days, Teh Hong Piow, the Public Bank founder was among the shareholders of Perak Carbide.

Perak Carbide was renamed MRCB in 1981 after a change in its core business from the production of carbide to property development and investment.

In the 90’s MRCB morphed into a political animal, controlling New Straits Times Press Holdings Bhd (NSTP), then a giant publishing company, the largest media group in the country, and also publicly traded TV3.

The MRCB story is often used to exhibit how corporate Malaysia works.

In January 1993, Realmild (M) Sdn Bhd, a private company controlled by the management of NSTP and TV3, acquired 48 per cent of NSTP and 43 per cent of TV3 in a deal worth a whopping RM800 million -- it might still be the largest management buyout in Malaysia to date.

Realmild was then controlled by four individuals closely linked to Deputy Premier then Anwar Ibrahim -- namely Abdul Kadir Jasin, Mohd Noor Mutalib, Ahmad Nazri Abdullah and Khalid Ahmad. The four were executives in the NSTP group, two of them -- Kadir and Nazri -- headed the English and Bahasa Malaysia sections respectively of the newspaper group.

The four flipped Realmild’s assets into MRCB in a reverse takeover.

Some say the corporate moves were an attempt by Anwar, manoeuvring to control the media before the impending Umno vice presidential elections in 1993.

With its political clout, MRCB grew to own such choice assets such as 20.2 per cent in Commerce Asset Holdings Bhd which owned Bank of Commerce Bhd (now CIMB)—via NSTP, a chunk of power generation companies like Malakoff Bhd, Sepang Power and Port Dickson Power among a whole host of other large assets.

In 1996, MRCB and Keretapi Tanah Melayu formed a joint venture to develop 77 acres of prime land in Brickfields which is MRCB’s flagship KL Sentral, and two years later the government even forked out a support loan of RM336 million to build the station.

However things took a turn for the worse in 1998, when Anwar fell from grace and when the Asian financial crisis started to bite. Lacking in political clout, MRCB’s downward spiral was a painful one exacerbated by the financial crisis of 1997-1998.

For its financial year ended August 1999, the company suffered losses of about RM1.45 billion from RM235.39 million in revenue.

As at August 1999, MRCB was saddled with short-term borrowings of RM923 million while the company long term debt commitments were RM473 million. On the other side of the balance sheet MRCB had cash and bank balances amounting to RM38 million.

For the year ended August 1999, MRCB’s interest payments on borrowings was RM118 million, about three times the company’s net profit.

After Anwar’s fall from grace in Sept 1998 when he was removed as finance minister and deputy prime minister and charged with sodomy, Abdul Rahman Maidin, a close associate of former finance minister Daim Zainuddin, was brought in to run MRCB in July 1999.

Daim had been collared in by then Prime Minister Dr Mahathir Mohamad to help deal with the financial crisis. Daim headed the powerful National Economic Action Council then.

But the slide continued. Daim himself appeared to have a rift with Mahathir and some of those who were close to him were removed from their position after their stakes in key companies were taken over by the governments. This included Halim Saad of Renong, Tajudin Ramli of Malaysia Airlines and Celcom (then under TRI) and Rahman Maidin at MRCB.

MRCB management went into professional hands with Abdul Rahman Ahmad and Shahril Ridza Ridzuan becoming managing director and executive director respectively in 2001.

Eventually MRCB was acquired by EPF in an apparent rescue of the group.

The EPF ended up with a chunk of MRCB’s stock in a debt for equity swap, after Realmild was unable to service borrowings from EPF. A large portion of EPF’s shareholding was obtained in January 2005, when the pension fund acquired a 20 per cent block of shares increasing its shareholding to 30.35 per cent then. Realmild ceased to be a major shareholder after that.

Shahril eventually became CEO of MRCB and left end-2009 after eight years. Following that Mohamed Razeek Md Hussain Maricar took over but left in August last year. Since then, MRCB has been without a CEO. Shahril himself became chief investment officer at EPF in 2010.

Under professional management, much was achieved at MRCB and the KL Sentral development has attracted much interest and has seen property prices climb. But it looks like now EPF has embarked on a path to inject entrepreneurship into MRCB.

This has happened through the proposed injection of Nusa Gapurna which has about 33 acres of prime land located in Petaling Jaya, Old Klang Road and Subang pegged with a gross development value of RM5.7 billion. Part of the plan is for Salim to eventually become managing director of MRCB.

EPF in a statement to KinBiz said: “The model is similar to that of SP Setia or Mah Sing, where an entrepreneur holds a significant stake and works on behalf of all the institutional and minority shareholders.

“The ultimate combination for the EPF is economically neutral as it had a 40 per cent stake in both businesses and will continue to have approximately the same stake in the combined entity going forward.”

EPF as a related party cannot vote on this deal, meaning it will be left to the minorities to decide.

Analysts and observers however question the move to bring in Salim and ask whether Salim has the right credentials to run MRCB. After all it can be rightly argued that MRCB has far more expertise developing properties than Salim himself. So why opt for him at this juncture?